Proposal: LDO Treasury Diversification

Summary

We propose that Lido sells 10% of the LDO token supply (100m LDO) for a total of 21,600 ETH to Paradigm and other strategic partners.

For Lido to flourish as an autonomous, self-governing collective, it is necessary to harness a broad range of the best participants in Ethereum’s DeFi ecosystem.

By having Paradigm and others become members of the Lido, this proposal will help guide development, facilitate vertical integration of stETH in Ethereum’s DeFi ecosystem and bolster Lido’s position as the market-leading solution for staking derivatives

We believe this will benefit Lido and propose to finalize these transaction terms in a Snapshot vote to execute the deal in the coming weeks.

Motivation

Paradigm’s support for DeFi projects and in-house expertise (including smart contract developers and security experts) positions it as a premiere participant in the DeFi ecosystem uniquely positioned to lend its expertise to LidoDAO governance and serve as a liaison to other DeFi project teams who can help further decentralize LidoDAO’s community.

The other strategic partners who will acquire LDO in the transaction will play a similar role.

Purchase Structure

Terms

We jointly propose the following terms:

  • 100M LDO (10% of supply) to be sold by the DAO treasury at a purchase price equal to 21,600 ETH.
    • Paradigm Fund LP to acquire 7%, or 70M LDO.
    • Other strategic participants to acquire the remaining 3%, or 30M LDO tokens, with the exact makeup of this group TBD.
  • Acquired tokens will be locked with a 1 year cliff and 1 year linear unlocking schedule.
  • Full voting power will be granted immediately upon closing of the sale, notwithstanding the lockup period.

Pricing

We believe this is an appropriate marketable price of LDO to provide these new strategic partners with “skin in the game,” enabling them to become independently incentivized participants in the LidoDAO.

Factors we have taken into account in proposing the price at which LDO are to be sold include:

  • Liquidity: LDO tokens have limited liquidity with a small proportion of tokens available in the market float (~1.97% at present).
  • Traction: The price appropriately values the project’s underlying traction to date, representing roughly a 60-65x multiple on the current LidoDAO fee stream.
  • Value-add: We believe Paradigm and other strategic partners will be valuable to the future decentralization and growth of Lido’s ecosystem.

About Paradigm

Paradigm is a San Francisco-based crypto investment firm founded by Fred Ehrsam and Matt Huang. The firm makes investments focusing on crypto and blockchain technologies from the earliest stages of ideation through maturity. You can learn more about Paradigm’s team here.

Paradigm has strived to partner with its portfolio investments by providing valuable input on product and technical strategy. The team actively contributes to protocol research (examples include Flashbots, Yield Protocol, Uniswap V3, Optimism), writing code, and, in some cases, auditing codebases.

Paradigm’s research team has evaluated MEV and PoS systems and openly contributed to community discussions about its interplay with DeFi and L2 scaling. Further, research has extended into stETH and other staking derivatives as an emergent unit of account in DeFi.


Update - Snapshot vote is active here: Snapshot

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Paradigm’s got a number of projects in portfolio that have perfect chemistry with Lido; Flashbots capturing MEV is one big example, decentralized exhanges and L2 projects that can benefit form having a low risk staked ETH asset as an option, etc. So I can see why it all makes a lot of sense!

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Hi,
How would you use those 21600 eth ?
Also they will have a huge vote power for a cheap price right ? Nearly 1/3 of actual ldo price

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Paradigm is a major investor in a lot of projects in this space. I’m hugely bullish on this proposal and will be voting yes.

For transparency sake it would be good to know what is to be done with the 21,600 Eth the DAO is purchasing. Will that be put to a vote?

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For! It’s an amazing proposal!

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Yeah, that would be voted on!

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The use of the ETH would be voted on by DAO.

The price is lower than current LDO market price yes but consider that the price was just a bit higher for quite some time just a few days ago.

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Voted on dao but with someone who own 10% voting power

Link to Snapshot vote: Snapshot

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Is this vote on track to pass?

It looks like it.
https://snapshot.org/#/lido-snapshot.eth/proposal/QmTR46STEjdRwmCKJjDThXXekKJHbhuiUHaXqDJqry3KqK

Considering there is a current supply of 20m LDO this 100m (10%) distribution would essentially be relinquishing control of lido.fi over to Paradigm right?

From my understanding after this sale Lido will be shifting from being a Decentralized to a Centralized staking solution

Supply is 1b of tokens, ~20m is free float (which wouldn’t change if the deal is executed). The total amount of voting power to participate in governance at all is circa 200-300m right now, so this deal will increase it to 300-400m.

Anyone concerned about this should read the following twitter thread by Hayden a founder of Uniswap.

It goes into some details of how Paradigm has been a value add to the project and team.

I personally think this will help create value and use case for the lido protocol and I am very excited to see the support for it.

3 Likes